Executive Summary

Market penetration to reach 60% among Africa's one billion people in 2012

Mobile phones represent more than 90% of all telephone lines in Africa. Market penetration passed the 50% mark in 2010 and is expected to reach 60% in 2012. Subscriber growth across the continent has slowed to around 17% p.a, but several individual markets are still growing at 50% p.a. or more and others stand at only single-digit penetration rates. The continent’s most advanced markets have passed the 100% penetration mark.

Although the greatest demand is in the major cities, cellular solutions are also being employed to increase accessibility in rural and other disadvantaged areas. In addition to mobile networks, Wireless Local Loop (WLL) systems have been introduced in a large number of countries for the provision of fixed-wireless services, with CDMA-2000 1x having evolved as a preferred technology. Additional choices are available through satellite-based mobile services such as Globalstar, ICO, Iridium and Thuraya.

The introduction of prepaid services and a steady decline in tariffs has meant that more than half of Africa’s one billion people can now afford a mobile phone. However, as lower income groups are being targeted, the declining Average Revenue per User (ARPU) is putting pressure on the network operators' profit margins. Literal price wars have broken out in some markets where a large number of operators have been licensed. Despite this, international investors are still very keen to enter the market through new mobile licences or shares in existing mobile operations in Africa.

With their superior national coverage and large subscriber bases, Africa’s mobile network operators have built up a level of market power to the extent that they have been called "the new incumbents". Newly introduced converged licensing regimes have increased the competitive pressure but also allow the mobile operators to branch out into new service segments.

A variety of companies have established themselves as regional major players in Africa’s mobile sector. France Telecom, through its Orange mobile division has established a presence in 18 African countries, South Africa’s MTN in 16, in addition to several in the Middle East. India’s Bharti Airtel took over 15 of the 16 African operations of Kuwait’s Zain for US$10.7 billion and is now operating in a total of 17 African countries.

MTN’s archrival in its South African home market, Vodacom’s expansion across the continent has been limited to a total of only five countries due to restrictions from the partnership agreement with its majority shareholder, Vodafone which itself operates in three countries.

Millicom from Luxembourg was also among the early investors and is now operating under the Tigo brand in seven African countries.

Orascom from Egypt divested most of its sub-Saharan operations between 2002 and 2005, mostly in markets with low penetration and high growth potential, to concentrate on the more developed North African and Middle Eastern markets. However, in 2008 it established a new subsidiary Telecel Globe to re-enter sub-Saharan Africa, including some of the same markets it had abandoned five years earlier.

Other regional players with major funding from the Middle East include the UAE’s Etisalat under the Moov brand, Warid Telecom, and the Lebanon-based Comium Group. Other African companies that have expanded beyond their home markets include Zimbabwe’s Econet, Maroc Telecom (with backing from Vivendi of France), Libya’s LapGreen and Sudan’s Sudatel under the Expresso brand.

Further consolidation is expected as smaller players are finding it increasingly difficult to compete. But even the bigger pan-African operators have become potential takeover targets for even bigger global players.

Market highlights:

Mobile market penetration in Africa to reach 60% in 2012;

Unsustainable price wars are raging in some countries;

Mobile ARPU has bottomed in some markets but is still falling rapidly in others;

Some mobile operators are rolling out national fibre optic backbone networks and are entering new service sectors under converged licensing regimes;

Subscriber statistics and estimates for 2012 for each country;

Mergers and acquisitions (M&A) are expected to intensify in an increasingly crowded market.

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